Reform expected to raise young adult premiums

A provision in the Patient Protection and Affordable Care Act might make health insurance a lot more expensive for young adults, a new study finds.

According to actuaries at consulting firm Oliver Wyman, the law’s age rating provision could mean a 42 percent hike in premium costs for people aged 21 to 29 when they buy individual coverage.

Similarly, the research finds that “single adults up to age 44 with incomes beginning above approximately 300 percent of FPL can expect to see higher premiums, even after accounting for premium assistance.”

Under health reform, insurers are limited to the amount they can charge older people for their health insurance to a maximum of three times the amount younger people pay.

Supporters say the age rating restrictions are necessary to ensure seniors are fairly charged for coverage, but others argue the requirement will raise costs for young adults and lead them to forgo health insurance, which will negatively impact the entire market.

“If younger, healthier people choose to forgo purchasing insurance until they get sick or injured, costs will increase for everyone—young and old,” says AHIP President and CEO Karen Ignagni.

America’s Health Insurance Plans has urged the Health and Human Services Department to delay its implementation of the 3:1 rule.

“Higher rates for the younger population combined with low mandate penalties during the first years of the ACA implementation will result in adverse selection because younger individuals are likely to choose not to purchase coverage,” AHIP wrote in comments to HHS. “When these younger individuals do not enroll, destabilization of the individual market will occur, premiums will increase in the individual market for enrollees of all ages, and enrollment will decline.”

The study also found that people in their 30s with single coverage who are not eligible for premium assistance would see an average increase in premiums of 31 percent, while those with single coverage aged 60 to 64 who are not eligible for premium assistance would see about a 1 percent average increase in premiums.

The authors said that to understand the full impact of the PPACA on premiums, “it’s important to move beyond broad averages.”

“Averages may mask substantial differences in how market reforms will affect individual states and various populations in those states, particularly in the pricing of coverage and the pooling of risk,” they wrote.

The study was published in the January/February issue of Contingencies, a publication from the American Academy of Actuaries.

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